Federal Appeals Court OKs San Francisco’s Tax-Mad Healthy Access Plan

Federal Appeals Court OKs San Francisco’s Tax-Mad Healthy Access Plan

I have written a lot about San Francisco’s Healthy Access Plan. SF HAP taxes small businesses, which cannot afford to provide health benefits, to fund the city’s public health bureaucracy. It’s a job-killer, gives no evidence of improving access to health care, and shakes down hospitals, too.

The Golden Gate Restaurant Association, relying on compelling precedent, sued the city in federal court, claiming that SF HAP violated the federal Employee Retirement Income Security Act (ERISA). The issue at hand is whether ERISA “pre-empts” state laws that compel employers to set up a health plan or fund the government to provide one. The U.S. 9th District Court of Appeals just found in favor of the city, allowing the SF HAP to proceed. This appears to oppose the U.S. 4th District Court of Appeals’s 2007 finding in the so-called “Maryland Wal-Mart” case, which said that Maryland’s law to tax employers for health benefits did violate ERISA.

It looks like this case will go all the way to the Supreme Court, where my friend Greg Scandlen anticipates victory for the Golden Gate Restaurant Association and preservation of ERISA.

That’s well and good. However, I’ve previously hinted that ERISA not a law that gives much encouragement to advocates of consumer-driven health care. (And I have not been alone.) Now that its status as an obstacle to the growth of government-dictated health care is wobbling, maybe it’s time to come off the fence and question the overall benefits of the law more forcefully.

First, its advocates note that ERISA allows large businesses to establish nationally uniform benefits for their employees, avoiding the bureaucratic requirements of complying with a patchwork of laws in all fifty states. True, but how important is that, really? Wal-Mart has businesses in fourteen national markets, including Mexico, Canada, India, and Japan. The logic of pre-emption suggests that International Labor Organization or World Health Organization policies should “pre-empt” national law, so as to reduce administrative costs of administering benefits!

Second, eliminating a federal pre-emption motivates states to compete against one another. Tax competition is a well-understood benefit of keeping the burden of taxation at the state and local level: states must cut taxes to attract capital and labor. Why not apply the same thinking to regulation? If IBM had an incentive to lobby in Albany, NY, or Hewlett-Packard to lobby in Sacramento, CA, to keep regulation of health benefits conducive to keeping jobs in-state, everyone would be better off.

Third, moving regulation to the federal level makes it harder for individuals to escape than if states regulate. Today, ERISA-regulation is considered “lighter” than state-regulation of health insurance. However, Congress has recently increased its power through the Genetic information Non-Discrimination Act (GINDRA) and an expensive mental health parity bill (the Wellstone bill) that was part of last Friday’s economic “bailout”! Even if the Supreme Court supports ERISA pre-emption, the momentum in Congress is to make all health insurance more bureaucratic, unresponsive, and expensive, and the Congress will change ERISA if it does not serve the purposes of government-dictated health care. Then where will the advocates of ERISA go? Canada? Switzerland?

Fourth, ERISA rests upon a presumption that the government should give employers control over our health care dollars – a presumption that advocates of consumer-driven health care oppose. Far better for us to focus efforts on reforming the Internal Revenue Code to give families the tax dollars that now go to companies, rather than investing effort in propping up ERISA.

Government-run health care is the problem, but ERISA is not really the solution: Let the states regulate health care.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.